Correlation Between Churchill and Stepstone

Can any of the company-specific risk be diversified away by investing in both Churchill and Stepstone at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Churchill and Stepstone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Churchill Downs 55 and Stepstone Group, you can compare the effects of market volatilities on Churchill and Stepstone and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Churchill with a short position of Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Churchill and Stepstone.

Diversification Opportunities for Churchill and Stepstone

-0.45

Correlation Coefficient

Churchill  Stepstone

Very good diversification

The 3 months correlation between Churchill and Stepstone is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Downs 55 and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Churchill is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Churchill Downs 55 are associated (or correlated) with Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Churchill i.e., Churchill and Stepstone go up and down completely randomly.

Pair Corralation between Churchill and Stepstone

Assuming the 90 days trading horizon Churchill Downs 55 is expected to under-perform the Stepstone. But the bond apears to be less risky and, when comparing its historical volatility, Churchill Downs 55 is 3.88 times less risky than Stepstone. The bond trades about -0.11 of its potential returns per unit of risk. The Stepstone Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,379  in Stepstone Group on September 2, 2024 and sell it today you would earn a total of  1,210  from holding Stepstone Group or generate 22.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

Churchill Downs 55  vs.  Stepstone Group

Churchill Downs 55

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Churchill Downs 55 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Churchill is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Churchill and Stepstone

The main advantage of trading using opposite Churchill and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Churchill position performs unexpectedly, Stepstone can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stepstone will offset losses from the drop in Stepstone's long position.

The idea behind Churchill Downs 55 and Stepstone Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.